Geographic Arbitrage: How To Live Richer While Spending Less

How to live richer while spending less with geographic arbitrage

Feeling stuck? You’re not alone. 

If you’ve cut costs everywhere you can think of and financial freedom still feels out of reach, there’s one more move you can make…

Geographic arbitrage.

Imagine enjoying a gourmet three-course meal in Portugal for less than a Big Mac combo costs back home. Envision living in a spacious three-bedroom villa in Bali for the same price as a cramped studio in NYC.

Doesn’t sound half bad, does it?

Stick around as we break down the secrets to the geoarbitrage strategy. This guide lays out the roadmap, explores the do’s and don’ts, and offers proven tips to help you unlock a richer life — all for a lot less than you pay now.

What Is Geographic Arbitrage (or Geoarbitrage)?

Geographic arbitrage, often shortened to geoarbitrage, is primarily a financial strategy. The goal is to maximize your purchasing power by living in a low-cost region while earning from a high-paying area.

This disparity allows you to significantly lower your expenses while maintaining the same (or even higher) quality of life.

But geoarbitrage is more than just a financial play — it can transform your whole life!

Relocating to a place like Mexico opens up unparalleled opportunities. You can dive into a rich culture, master a new language, and live life at a more relaxed pace.

Oftentimes, this relocation allows you to pursue Coast FIRE years earlier than you could in the United States. With that extra time, you can save much more for retirement while enjoying new experiences that may not be available back home.

Benefits Of Geographic Arbitrage

Geographic arbitrage offers a blend of financial advantages and lifestyle enrichment. Let’s explore each of these benefits.

Financial Advantages

With geographic arbitrage, financial independence could be closer than you realize. Here’s why:

  • Increased Investment Rate: The money you save on expenses can go directly toward your investments. For example, the average cost of living for a family in Mexico is $2,213 per month vs. $5,291 in the States. That’s a difference of $36,000+ per year that you can use to turbo-charge your wealth-building!
  • Tax Advantages: The Foreign Earned Income Exclusion (FEIE) allows U.S. expatriates (“expats”) to earn up to $120,000 (in 2023) without paying any federal income taxes. That alone can translate to an immediate 20% savings before taking into account the lower cost of living!
  • Accelerated Debt Repayment: You can use your savings to wipe out student loans in record time. For example, if you have $50,000 in student loans and you save $2,000 per month with geoarbitrage, you could eliminate them in a little over two years! Compare that to 20 years for the average student borrower.
  • Bridge the Gap Until Retirement: Use geographic arbitrage in conjunction with FIRE to reach early retirement goals even faster. By reducing your living expenses, you can lower your FIRE number and slash years off your retirement timeline.
  • Start a Business: Starting a new business in the U.S. can cost tens of thousands of dollars before you make your first sale. Rent, equipment, and employees can add up! Fortunately, you can run an online business from practically anywhere. Take my friend Gary, who operates his Canadian SEO business from Mexico. The breathing room in his budget allows him to work fewer hours and travel more — all without sacrificing his business success. 

Lifestyle Enrichment

Geographic arbitrage goes far beyond dollars and cents — it’s your ticket to getting out of life’s monotony! Instead of feeling stuck, the new experiences that await you can make every day an exciting adventure.

  • Learn a New Language: Have you spent years on Duolingo, yet you still can’t order more than a coffee in Spanish? Living abroad supercharges your language learning. Imagine navigating local markets with ease and unlocking deals that tourists can only dream about. Learning a new language doesn’t just look good on your resume. It helps you live like a local and save like one too.
  • Cultural Experiences: When you are part of the culture, festivals like Holi in India or Day of the Dead in Mexico take on a whole new meaning. As a tourist, you are often left observing from the outside. But as a resident, you can participate and learn the deeper meaning behind every tradition.
  • Quality of Life: Many cultures value family time and personal relationships above chasing the almighty dollar. For example, Americans often push through a full workday with just a quick lunch break (often at their desk). Spaniards, on the other hand, embrace the “siesta.” Businesses shut down mid-day and streets go quiet from 2 p.m. to 5 p.m. as people rest and spend quality time with their loved ones. This daily ritual is a reminder that there’s more to life than grinding for a paycheck.
  • Personal Growth: If you dream of becoming more self-reliant and adaptable, or a better communicator, then geoarbitrage may be the perfect avenue to sharpen your skills. You will navigate unexpected challenges, adapt to new social norms, and gain a richer view of the world. In this way, the experience itself becomes an invaluable life lesson, bringing you closer to the person you aspire to be.

So forget the stress of high-cost living and enjoy the quality of your moments over the quantity of your dollars. Geographic arbitrage could give you the best of both worlds — incredible cultural experiences and wealth-building savings!

Geographic Arbitrage Is Easier Than Ever!

Leveraging geographic arbitrage is easier than you might think. Technological advances and the boom in remote work during the COVID-19 pandemic have made this financial strategy a viable option for almost everyone. 

And you don’t have to be a digital nomad or move your family overseas to take advantage of geographic arbitrage. Plenty of lower-cost areas within the U.S. offer the benefits of geoarbitrage too! 

For example, you could live in Sacramento instead of the Bay Area, Tacoma instead of Seattle, or Arlington instead of Dallas. Another up-and-coming option is Fort Wayne, Indiana, where living costs are 10% lower than the U.S. average.

Even high earners participate in geoarbitrage! High-powered lawyers and bankers in New York City often choose to commute a few times per week. Nearby towns like Maplewood, New Jersey, and Greenwich, Connecticut offer more space and lower taxes than Manhattan. And now that most offices no longer require everyday attendance, the tradeoff makes even more sense.

Whether you’re a remote worker, planning for early retirement, or just seeking to make your money work harder for you, geoarbitrage offers flexible solutions (that don’t require getting a passport).

What Are The Best Countries For Geographic Arbitrage?

When most people think about geoarbitrage, they picture living in an exotic location at a fraction of the cost of the U.S. However, selecting the ideal country for geoarbitrage is about more than pinning a spot on a map because it looks good on a postcard — it’s about aligning your lifestyle with your financial goals. 

The Criteria

Here are a handful of factors to consider before taking advantage of geoarbitrage:

  • Cost of Living: For most expats, this is the primary reason to move abroad. The lower your living expenses, the more money you have available for investments and debt repayment.
  • Proximity to the U.S.: This factor is often overlooked by beginners eager for adventure. Being close to the U.S. offers advantages like smoother transitions, easier trips back home, and more manageable time zone differences. This could be a deciding factor when comparing Mexico and Spain, for example.
  • Quality of Life: Moving to a foreign country isn’t the same as going there on vacation. Look for a country where you’ll enjoy the day-to-day experiences, not just the low price tag.
  • Expat Community: A strong expat presence can ease the transition and offer a support system. It can also make for a much more enjoyable stay than trying to navigate a foreign country alone.
  • Internet Speed: Reliable internet is a must-have for digital nomads and remote workers. Make sure to perform several tests before the big move!
  • Safety: Many Americans are surprised to learn that the U.S. has a higher crime rate than many popular expat destinations. However, you should still do your homework before making a move. Take the time to investigate crime rates and political stability, and seek out personal stories from other expats to get a well-rounded view of your potential new home.
  • Medical Care: Don’t overlook the healthcare system. It should be both affordable and of high quality. You can find rankings by country published on reputable sites like Numbeo and the World Health Organization.

The Countries

Once you weigh these factors, you can begin ranking countries that align with your wishlist. Here is the list of top contenders from around the world:

  • Mexico: Mexico offers a dynamic mix of bustling cities, historic colonial towns, and serene beaches. Plus, it is close to the U.S. and boasts a low cost of living. You can expect to spend $1,200 to $1,600 per month for a comfortable lifestyle — less than half of what you need in most U.S. cities.
  • Thailand: Known for its stunning beaches and delicious cuisine, Thailand offers an incredible yet cost-effective lifestyle. You can live comfortably for as little as $1,000 per month, even in tourist-heavy cities like Bangkok or Chiang Mai.
  • Portugal: A European gem that often flies under the radar, Portugal pairs a rich history with a moderate cost of living. For about $2,000 per month, you can enjoy a wonderful lifestyle along the stunning Atlantic coast.
  • Georgia (the country): A trendy destination for digital nomads, Georgia provides a unique blend of old-world charm and modern amenities. With a monthly budget of around $1,200, you can enjoy a lifestyle that’s both enriching and easy on the wallet. Plus, you are just a short train ride away from some of the most popular destinations in Europe, like Vienna, Athens, and Rome.
  • Vietnam: Vietnam has become an emerging hotspot for expats, particularly in places like Ho Chi Minh City and Nah Trang. Offering an exciting blend of urban sophistication and rural charm, the country is not only captivating but also affordable. In most cities, a couple can live a comfortable middle-class lifestyle for $1,300 per month. 

Getting Started With Geographic Arbitrage: Your First Steps

If an international move sounds stressful, take things one small step at a time. Here’s how to begin:

  1. Define Your Why: Are you moving to save money, explore the world, or both? Understanding your motivations will keep you focused and help you define your next steps.
  2. Decide on a Location: Whether you choose to remain in the U.S. or move abroad, your destination will shape the logistics you have to coordinate. Important factors to consider are cost of living, safety, and quality of life.
  3. Planning Your Move: Check to see if your current job can transition to remote work. If not, now is the time to explore new options or consider starting a business. No matter how you proceed, save up at least three months’ worth of living expenses before making the transition.
  4. Rent Your House: Instead of selling, start by renting out your house. The rental income will provide a financial cushion. Plus, this leaves your options open just in case things don’t go as planned.
  5. Test the Waters: Geographic arbitrage doesn’t have to be a lifetime commitment right out of the gate. Try it for a 3 to 6-month period, and make adjustments as needed. Many people use geoarbitrage to reach a specific financial goal — like paying off student loans or jumpstarting their retirement. Then when they reach that goal, they can resume their previous lives with less financial stress.

Final Thoughts

Geographic arbitrage isn’t about escaping your current life — it’s about enhancing it. After all, the most rewarding adventures often start with a single bold step.

By embracing geoarbitrage, you won’t just save money. You will likely experience a richer life, full of new opportunities. 

So don’t let the idea that you are anchored to a high-cost area for your job or family hold you back. In our ever-shrinking world, technology has made it much easier to live and work from practically anywhere. 

If you make the jump, you may find yourself thinking less about the money you make and more about the memories you create.

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